Evaluating the Total Cost of International Assignments

Companies with global mobility programs are being forced to consider the cost of international assignments, ideally in relationship to the overall business value. Despite this priority, many businesses find it difficult to ascertain the total cost of an assignment ahead of time, as well as its eventual benefits.

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Oct 22, 2018
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Companies with global mobility programs are being forced to consider the cost of international assignments, ideally in relationship to the overall business value. Despite this priority, many businesses find it difficult to ascertain the total cost of an assignment ahead of time, as well as its eventual benefits.

This is the first article of a series that will explore the methods of evaluating foreign assignments, based on cost, value, business objectives, ROI and available metrics. Instead of just reviewing the challenges, this series will offer potential solutions to companies of all sizes that send employees on assignment, including the use of a local employer of record for compliance and cost savings in the host country.

The Lifecycle of a Foreign Assignment: The Initiation Stage

The following scenario gives a fictional portrayal of how many assignments are initiated in a company, which will impact the overall cost.

In a US company, the VP of marketing and sales, walks into the HR department and says; “we are sending three more sales people to China to cover a new region…we need to know the best candidates to send and what the overall cost will be, so accounting can put together a budget.  No matter what the final amount, the decision has been made, so just do the best you can on short notice.”

The HR department may not be concerned about overall assignment cost, and instead focuses on identifying the best candidates who can be effective in a sales position in China.  However, not all assignees are equal, and experienced candidates may require higher expenses or compensation than others.  It is these variables that make evaluating the cost of international assignments difficult for both large and small companies.

According to one survey, over 50% of companies that send employees on assignment do not track actual and projected costs, and 90% do not use metrics of any type to track the ROI of foreign postings.

In some cases, there may not be a formal cost evaluation process in place, and initial budgets may be set without regard to the realities of the assignment.  So what can a company do to meet this challenge during the initiation stage?

What Factors Contribute to the Total Cost of International Assignments?

The total cost of an international assignment will depend on many elements, some of which may be hard to manage once the assignment begins.  In the initiation stage, the following factors need to be considered along with compensation.

Taxation of BIK

Allowances for housing, transportation and other expenses may be taxable to the employee at home, and the company may need to increase compensation to account for the effect on overall compensation.

Living Expenses

Some assignment locations may carry a high cost of living, unusual expenses and even security measures that can add to the total cost of an assignment.

Currency Fluctuations

If the country of assignment has a volatile currency, certain expenses could increase over time against the home country currency.

Repatriation

If the assignment fails for any reason, there is a cost for repatriating the worker and finding a replacement.  Few companies budget for this foreseeable and not uncommon outcome.

Cost vs. Value: Return on Investment for International Assignments

Evaluating the cost of international assignments is only the first step toward arriving at its value for a company.  Certain non-financial benefits have to be considered as part of the return on investment, and some of those may not be easily measured or known in the short term.

“…while HR and global mobility colleagues generally want to have a discussion about value, they are asked only for cost information. As this is much easier to identify and predict when compared with value parameters, and given that the business appears to have made its decision already, parties continue to talk cost instead of value.”  

The value assessment issue will be addressed in a subsequent article in this series...read more

Shield GEO makes international employment simple. Our customers use Shield GEO to employ and payroll hundreds of workers in over fifty countries. Find out more. 

Go to the profile of Tim Burgess

Tim Burgess

Director, Shield GEO Services Ltd

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